A new act, the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act (the “Act”), is poised for signature by President Biden. The Act amends the Federal Arbitration Act that requires valid arbitration agreements to be enforced according to their terms and end the use of mandatory pre-dispute arbitration agreements and pre-dispute joint-action waivers in employment claims of sexual assault and sexual harassment. This means that plaintiffs may choose whether to use arbitration or the court system to litigate their claims of sexual assault or harassment in the workplace—employers will no longer be able to require binding arbitration in these cases. The Act passed both houses of Congress in early February with strong bipartisan support. The Act applies to cases filed under Federal, Tribal, or State law, and some aspects apply retroactively. Employers should prepare for changes they will need to make to their arbitration policies once the Act becomes law and determine the implications of the law for pending cases.
Key Points of the Act
The Act defines “pre-dispute agreements” as “any agreement to arbitrate a dispute that has not yet arisen at the time of the making of the agreement”, and a “pre-dispute joint action wavier” as “an agreement that prohibits a party from participating in a joint, class, or collective action in a judicial, arbitral, administrative or other forum, regarding a dispute that has not yet arisen at the time of the making of the agreement”. These agreements are also referred to as “forced arbitration clauses.”
The Act gives the courts–not the arbitrator–full discretion to determine whether the Act applies to the validity and enforceability of an agreement to arbitrate, even where the agreements expressly delegate the question to an arbitrator.
Prospective plaintiffs can choose whether to litigate their sexual assault or harassment claims in court or through arbitration, and individual plaintiffs have the option to form a class and bring a class-action lawsuit. Further, the Act only pertains to “pre-dispute arbitration agreement or predispute joint-action waiver in sexual assault and sexual harassment disputes”, which means that employees and employer can still reach an agreement to arbitrate a sexual assault or sexual harassment dispute after the dispute or a claim arises and may still agree to arbitration that does not include harassment or assault claims. For example, the Act did not address whether employers may continue to compel arbitration agreements on retaliation claims or may request employees to waive “jury trial.” Employers need to closely monitor the new development and the cases to be adjudicated on this new Act. Arbitration agreements entered into prior to the Act being signed into law will not be valid. However, prior cases completed under forced arbitration are not affected by the Act, which specifies, “This Act, and the amendments made by this Act, shall apply with respect to any dispute or claim that arises or accrues on or after the date of enactment of this Act.”
Make Addressing the Implications of this Law a Priority
Employers should work with their legal counsel to address implications for their business when this Act becomes law:
- Prepare to update any arbitration clauses in current and future employment agreements: make exceptions for sexual assault and sexual harassment. Note that, while employers can’t require employees to agree to a binding pre-dispute arbitration agreement for sexual assault and harassment claims, an arbitration agreement is still an option for these claims after the claims arise if the employees agree to arbitration voluntarily. Pre-dispute arbitration agreements are invalided under the new Act for claims other than sexual assault and harassment claims.
- Review pending matters regarding sexual harassment or sexual assault claims that are scheduled for arbitration:
- Prepare for the possibility that the individual(s) making the claims will request that the case goes to court instead.
- Consider expediting such cases for pre-trial settlement negotiations.
- Establish and/or enforce disciplinary actions, including immediate termination, against employees who violate the employer’s no-sexual assault and sexual harassment policy.
Employees who have a pending case scheduled for arbitration may want to consider having their attorney file a legal challenge to invalidate the arbitration proceedings and move the case to court after the Act becomes law.
When discussing this Act, much of the focus has been on its impact on binding arbitration clauses in employment agreements. However, the Act will also affect such clauses used with a business’s clients and customers.
Implications of the Act Becoming Law
Under the confines of binding arbitration, a victim of sexual assault or sexual harassment is prohibited from publicly disclosing any details about their case. Once the Act becomes law, employers face the risk of negative publicity that such cases going to trial—and victims speaking publicly—could bring. This reality may spur employers to revise their policies regarding acceptable behavior in the workplace and strengthen their response to sexual assault or sexual harassment claims. The result could be a reduction in the need to bring such claims in the first place because the climate has become less hospitable to perpetrators.
Although the Act’s ending of forced arbitration is limited to sexual assault or sexual harassment claims, the possible effects on workplace arbitration overall will play out over time.
If you have any questions regarding this information, please contact us at (216) 573-6000.
This article is for informational purposes only. It is merely intended to provide a very general overview of a certain area of the law. Nothing in this article is intended to create an attorney-client relationship or provide legal advice. You should not rely on anything in this article without first consulting with an attorney licensed to practice in your jurisdiction. If you have specific questions about your matter, please contact an attorney licensed to practice in your jurisdiction.